CommBank IT services expenses rise to $627m

The Commonwealth Bank of Australia has booked an eight percent rise in IT services expenses to $627 million for the six months to December 2012.

CommBank CEO Ian Narev.

The bank attributed the rise primarily "to additional system support costs and increased software amortisation driven by the Core Banking Modernisation initiative", the bank said in its half-yearly financial filings (pdf).

Amortisation costs rose from $90 million for the half-year ended 30 June 2012 to $112 million for the last six months of the calendar year.

Application maintenance and development also booked a substantial half-on-half increase in expenses, though it has been trending upwards over time.

CBA ran up $211 million in such expenses in the final six months of calendar year 2012, compared to $172 million in the prior six months to June 2012, and $150 million in the six months prior to that.

Desktop technology services expenses increased from $41 million to $50 million half-on-half, but there were reductions in IT services expenses for data processing and communications.

More core

Although CBA declared its billion dollar, five-year modernisation project as complete in late October last year, some elements of the project remain in play, the bank's CEO Ian Narev told analysts yesterday.

"By the time we present our results for the full year [2012-13], that project will be complete," Narev said.

"We're migrating Commercial Lending across in March.

"We're obviously not taking that for granted — it's still a lot of work to do, [but] assuming that goes as planned, by the time we next speak [to analysts about results], that program will be finished."

CBA provided a before-and-after glimpse of the return on investment it achieved through its core modernisation in supplementary slides issued with financial filings (pdf).

The bank said IT infrastructure now accounted for 26 percent of total IT spending by CBA, compared to 50 percent of IT spend six years ago.

Where CBA experienced 70 severity 1 ("sev 1") incidents a year before modernisation, it has now brought that number down to less than seven a year.

Meanwhile, it has vastly increased the number of new services and enhancements being added to systems on a monthly basis, from 1200 being put in production per month six years ago, to 3000 changes into production today.

App, online world

Narev said that finalisation of the core modernisation meant the bank had more capacity to devote to other technology-related investments.

He cited the HTML5-based MyWealth website launched last week as an example.

"We've had very encouraging signs," he said.

"I think 30,000 visited in the past week and people stayed for an average 10 minutes on the site.

"That is really a category-leading platform in the investment and wealth management area."

Narev also said that videoconferencing systems will be rolled out to all CBA's 1000-plus branches by June this year.

CBA further claimed to have had over 4.5 million downloads of CommBank apps, 739,000 downloads of its Kaching smartphone payment app, and over $4.7 billion in transactions made using Kaching as at February 3.